On April 10, 2020, FERC consolidated two separate dockets resulting from PJM Interconnection, L.L.C.’s (“PJM”) Order No. 841 compliance proceeding, and established paper hearing procedures to examine PJM’s methodology for calculating capacity values—not just for Electric Storage Resources (“ESRs”) participating in its capacity markets, but for all resource types, including run-of-river hydroelectric resources with and without reservoir storage capability. However, FERC held the proceedings in abeyance through October 30, 2020 to permit PJM and its stakeholders time to consider replacing the current capacity value calculation methodology with a new, Effective Load Carrying Capability (“ELCC”) approach. FERC concluded that the October 30 deadline would provide sufficient time to consider the new approach, while also allowing for new rules to become effective in advance of PJM’s next capacity auction. Commissioner Richard Glick issued partial dissent, explaining that he would have held the proceedings in abeyance until January 29, 2021.

FERC’s April 10 order stems from PJM’s Order No. 841 compliance proceeding, in which FERC: 1) established hearing procedures in Docket No. EL19-100 to investigate whether PJM’s application of minimum-run time requirements to ESRs participating in its capacity markets is just and reasonable; and 2) directed PJM to submit Tariff provisions reflecting its minimum run-time rules and procedures applicable to all capacity resources, including but not limited to ESRs (see October 24, 2019 edition of the WER).

In order to comply with the latter directive, PJM proposed Tariff revisions in Docket No. ER20-584 that it stated merely incorporated into its Tariff pre-existing rules determining capacity values—i.e., the amount of generating capacity a resource can reliably be expected to offer in PJM’s capacity market. Specifically, PJM proposed to group capacity resources into three categories:

  1. For generating units that can maintain a stated level of output without interruption for an extended period of time, PJM proposed to determine capacity values based on the level of output those units are capable of providing under ambient conditions that are expected to exist during PJM system peak loads.
  2. For generating units with limited energy capability (including ESRs), PJM proposed to determine capacity values based on the stated level of output that those resources can sustain over a continuous 10-hour duration.
  3. For generating units with output that varies as a function of a non-continuous energy source and that cannot be directly controlled (e.g., wind and solar units), PJM proposed to define capacity values by the level of output that the energy source allows the resource to reliably produce at the time of system peak loads.

In response to PJM’s filing, certain parties submitted comments indicating they would address PJM’s proposed calculation methodology for ESRs in the upcoming paper hearing in Docket EL19-100. However, Brookfield Renewable Trading and Marketing LP (“Brookfield”)—the power marketer for Brookfield Renewable’s hydroelectric project generation companies in North America—filed a protest taking issue with PJM’s proposal to treat run-of-river hydroelectric resources with reservoir storage capability similarly to ESRs, and to treat run-of-river hydroelectric resources without reservoir storage capability in a manner comparable to wind and solar resources. Brookfield argued that doing so would not accurately reflect PJM’s existing methodologies for determining the net capability of its run-of-river hydroelectric resources for purposes of participating in the PJM capacity market.

FERC’s April 10 order concluded that there are common issues of law and fact regarding PJM’s capacity value methodology for ESRs and for all other resource types, and thus consolidated Dockets EL19-100 and ER20-584. Citing Brookfield’s protest, FERC stated that PJM’s compliance filing in Docket No. ER20-584 may not reflect its existing capacity value methodologies for run-of-river hydroelectric resources, and expressed concern that PJM’s capacity value calculation methodologies for all capacity resource types are unjust and unreasonable.

At PJM’s request, FERC also held the consolidated proceedings in abeyance pending PJM’s ongoing stakeholder proceedings aimed at developing its ELCC construct, though FERC truncated PJM’s requested abeyance period. FERC explained that if PJM filed a new proposal based on the ELCC construct by October 30, 2020, then the proceedings will be held in further abeyance; if PJM did not file a new proposal, then the paper hearing would resume, with initial briefs due by October 30, 2020; responses due by November 20, 2020; and replies due December 7, 2020.

In a separate statement dissenting in part, Commissioner Glick stated his belief that FERC should have held the proceedings in abeyance through January 29, 2021 in order to give PJM and its stakeholders adequate time to determine the capacity valuation methodology for all resource types, a task he described as “no mean feat.” Commissioner Glick stated that he will remain open to granting PJM additional time beyond the October 30, 2020 deadline set in the April 10 order if needed.

FERC’s order is available here.